U.S. Job Market Shows Signs of Cooling as Unemployment Claims Edge Higher

Slightly more Americans filed for unemployment benefits last week, with claims rising by 2,000 to 230,000 for the week ending September 7, according to the Labor Department. Despite the slight increase, layoffs remain at historically low levels, even after two years of elevated interest rates designed to slow inflation.

Unexpected Rise in US Unemployment Claims Signals Potential Fed Rate Cut
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#Economy 📈 #UnemploymentClaims 📊 #FederalReserve #InterestRates #JobMarket 🔍 #EconomicGrowth #Inflation 📉 pic.twitter.com/j0cK6Y1mkv

— Unmeego (@unmeego) September 12, 2024

Economists had predicted the 230,000 figure, and the four-week average of jobless claims, which helps smooth out week-to-week fluctuations, also rose slightly to 230,750. Meanwhile, the total number of Americans currently receiving unemployment benefits rose modestly by 5,000, staying close to 1.85 million for the week of August 31.

Though unemployment filings are up from earlier this year, they still remain low compared to historical standards. In the first four months of 2024, weekly jobless claims averaged about 213,000 but started to rise in May, peaking at 250,000 in late July. This increase is being seen as further evidence that high interest rates are finally having an impact on what was a blazing hot job market.

In August, employers added 142,000 jobs, a modest improvement over the 89,000 jobs added in July. However, this figure is still well below the average monthly gains of 218,000 from January to June. Additionally, the Labor Department recently revised its figures, reporting that 818,000 fewer jobs were added between April 2023 and March 2024 than initially reported, further supporting evidence of a gradual slowdown in the job market.

The Federal Reserve’s aggressive effort to combat inflation, which hit a 40-year high over two years ago, has included raising its benchmark interest rate 11 times throughout 2022 and 2023. This has pushed interest rates to a 23-year high, where they have remained for over a year. Inflation has since cooled, with levels now nearing the Fed’s 2% target, prompting Federal Reserve Chair Jerome Powell to declare that inflation is largely under control.

🚨BRACE OF SPIKE IN THE US UNEMPLOYMENT🚨

US Treasury yield curve turned positive last week and has been ever since.

In the past, within 12 months from un-inversion, the US economy experienced a 200-300K monthly job contraction.

History does not repeat itself but often rhymes. pic.twitter.com/G2y5f4OYyV

— Global Markets Investor (@GlobalMktObserv) September 12, 2024

As a result, most analysts expect the Fed to cut its benchmark interest rate by a quarter of a percentage point at its upcoming meeting, instead of the more aggressive half-point cut that had been anticipated by some economists.

Key Points:

i. Unemployment claims rose by 2,000 last week to 230,000, matching economists’ predictions.

ii. Despite the increase, layoffs remain low compared to historical levels, though claims have risen since May.

iii. The U.S. job market is cooling, with only 142,000 jobs added in August, down from monthly averages earlier in the year.

iv. A recent revision by the Labor Department showed 818,000 fewer jobs added from April 2023 to March 2024 than initially reported.

v. The Federal Reserve is expected to cut interest rates by a quarter point as inflation nears its target level.

Susan Guglielmo – Reprinted with permission of Whatfinger News